IP-Russian JV Ilim to Move Ahead with New Pulp Mill

Print this article | Send to Colleague

Ilim, Russia's largest pulp and paper company (50% owned by International Paper, Memphis, Tenn., USA), announced this week that it is moving ahead with construction of a 720,000 metric tpy softwood pulp mill in Bratsk, Siberia, according to Mark Wilde, senior analyst with Deutsche Bank. Built on an existing site, the mill will cost an estimated $700 million and is slated for a second-half 2012 startup. Production will be targeted at the growing Chinese market. 

The decision to move ahead with this project, Wilde notes, reflects the combination of an improving global economy, rising pulp prices, and more accommodating capital markets. The project represents more than one-third of the capital program announced when IP entered the Ilim joint venture. That program was delayed by the global economic crisis. Withthis week's announcement of the new mill at Bratsk, it appears the Ilim capital program is back on track, Wilde adds. Engineering and construction will reportedly start immediately. Equipment orders have already been placed.

With this surprise announcement, Ilim has "leap-frogged" to the head of a line-up of new pulp mill projects, Wilde points out. "On our recent Latin American tour, we heard about projects that could boost Latin American market pulp capacity by as much as 12-15 million metric tpy over the next five to six years. With an improving economic backdrop and capital markets re-opening, the project pipeline appears to be quickly reloading. Judging by what we heard in Latin America, a few weeks ago and announcements like Ilim's, this could prove to be one of the greatest waves of new pulp capacity in history."

According to Wilde, the Ilim project appears to have the advantage of being the "early mover" as well as the only pure softwood (long fiber) project on the list. Virtually all of the Latin American projects will produce hardwood (short fiber) pulp. "The unit capital cost at Bratsk (about $1,000/metric ton) appears to be in-line or slightly below the numbers we heard in Latin America," he adds.